Many investors talk about buying foreclosures as a chance to purchase undervalued property to re-list it at a higher price. However, there is an alternative realty investment option that many times goes under the radar. It’s the rental market.
What do foreclosures have to do with rentals? A lot, actually, according to one San Jose property management company. Let’s drill down to two major points here: Rental price and purchase price.
Foreclosures have an effect on purchase prices
First of all, nearby foreclosures affect the value of a home, which affects the investment potential of the home. If you are not able to purchase a property at below market value, you will have a hard time maintaining a positive cash flow on the property.
Foreclosures impact rental prices
Second, foreclosures affect the dynamics of the rental market by putting former homeowners into marketplace to create demand for rental properties. When a larger quantity of potential renters competes for a limited number of properties to rent, monthly rents are going to go up or at least remain relatively stable. This can help ensure a stable, positive cash flow for the investment property.
As a results of these foreclosure factors, savvy rental property investors are stepping up to the plate to participate in the foreclosure as rental market. It’s a fact that very few rental markets in the United States are hurting, and that’s precisely because more people than ever before are being forced to rent due to circumstance.
One Colorado Springs real estate company is saying that rates of vacancy have decreased significantly in 2010 over 2009 rates. This is good news for investors interested in snapping up Colorado Springs rentals as the market is seeking to correct itself from the peak experienced in 2006.
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